March, 2024

Issue #5

Edito
Ever heard of sectoral policies? They are pitched as the silver bullet for cleaning up
financial portfolios. But picture this: financial institutions selectively applying these policies
to just a fraction of their activities. Sounds absurd, right? Well, brace yourself, because thiskind of greenwashing is shockingly common. To find out more about this deceptive practice,
dive deeper into our latest report on big asset managers and passive investment.
Similar patterns are evident elsewhere. Financial institutions claim to be cutting down on
their support to a sector without considering it in its entirety. Issue #2 of this newsletter
already highlighted the shortcomings of banks’ coal policies, most of which only concern
thermal coal and fail to address metallurgical coal. To continue this line of thought, all majorbanks, with the exception of one, completely overlook other segments of the coal value
chain, particularly the highly emitting steel sector. The latter is responsible for 11% of global
CO2 emissions due to its reliance on metallurgical coal, and is still massively backed by thebanking sector, as Reclaim Finance's new report uncovers.
One last greenwashing case before letting you discover this newsletter. Despite supportinga managed phase-out of coal-fired power plants, Singaporean bank DBS forgets the very
first step: ending support to companies developing new coal projects. Any coal commitment
lacking this crucial element, like DBS’s, is unworthy of the climate emergency.

Noam-Pierre Werlé, Policy Analyst at Reclaim FinanceNew policies & updates

13191+3 updates:+2 updates:

coalpolicies

oil & gaspolicies

8sustainable powertargets

DBS
Lloyds Banking
GroupPNC

Danica Pension
PNC

Focus on passive investment and policies
Passive investing is a growing trend in the asset management industry, with the volume ofassets managed by passive funds now exceeding that of active management. Morepassively managed assets means more and more financing to fossil fuel companies. And as
new research shows, this is even the case for products labeled as “sustainable”.
What is passive investment?
Passive investment is a type of investment in which funds replicate the composition andperformance of a specific index. For example, such funds can hold securities (shares orbonds of a company) of all firms in the S&P 500 or the CAC40.
In 2023, five of the world’s largest asset managers, BlackRock, Amundi, UBS AM, DWS andLegal & General Investment Management (LGIM), all of which hold a large number ofpassive funds, still held at least US$227 billion in companies expanding fossil fuels... And
roughly 60% of this amount is estimated to come from their passive portfolios. Passive
investing also raises another investment solutions. In fact, 70% of the ‘sustainable’ passive
funds analyzed were exposed to fossil fuel expansion; French asset manager Amundi has
the highest share of the five (78%).
How can asset managers change their practices?
When investment restrictions on fossil fuel companies are implemented by asset managers,
passive funds are usually left out of their scope. Indeed, investors state that excluding
companies from an index fund is a complex process, involving index providers. BlackRockand its peers pretend that as the adjective “passive” suggests, their hands are tied when it
comes to choosing the companies found in their index funds.
The five asset managers in scope of the report either have no fossil policy at all, or therestrictions concerning passive funds are significantly weaker than for active ones. It isurgent that asset managers adopt stringent criteria for companies to comply with to befeatured in their 'sustainable' funds, including the passive ones. This means, for example, toengage index providers regarding the quality of their methodologies and progressively
switch to cleaner indices. Last, this focus on passive investment must not allow us to forgetthat some of these players have yet to adopt minimal commitments for their active
management activities. Those should now urgently act on both fronts.

Find out more

Latest news
DBS: deceptive new commitmentson coal retirement
A closer look at DBS’s updated coal commitmentsshows that the bank’s commitment to coal power
retirement is lacking most elements of a robust
policy, including the end of support to companies
expanding coal. Read more

New NZBA guidelines but persisting
mistakes
The Net Zero Banking Alliance slightly enhances its
level of ambition, calling on its members to adopt
targets for their capital market activities. Still, thealliance forgets to address the inconsistencies oftarget-setting: incomparability, lack of transparency
and clarity. Read moreResources

DiscoverDiscoverDiscoverTake action!
Find out more about our recommendations for financial institutions to adopt robust fossil fuelpolicies.

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